Management of Receivables in India (A study from Food product producing companies)

Abstract

Trade credit is different from bank credit. In bank credit motive is to earn profit, but the trade credit is an aid in selling goods and services at a profit. It is confined to receivables arising from transaction between companies. Trade receivables arise from the extension of credit by one business firm to another in order to facilitate the sale of the credit grantor’s product. Trade credit is an important source of finance short term capital for businesses after the Bank finance. For the seller, it represents an investment in accounts receivables. Receivables management is the process of controlling and collecting payments from customers. This function helps companies to control credit policies, that can help to improve revenues and leads to financial stability. The most predominant problem Companies face in today’s challenging and competitive environment is timely realization of receivables to a successful business and due to cashless transactions with customers, risk is attached to services at a profit and therefore it need a proper management. Objectives of the paper as follows:

1. To study the principles and practices of Receivables management in selected companies


2. To study the relationship between Receivables management and profitability.

The paper will use the regression analysis for the period of 2010-2015, which shows whether the accounts receivables management is important or not for the profitability of the companies. The study will be based on secondary data collection with the help of PROWESS